Mega bank merger

1. MEGA BANK MERGER
Announced in Aug 2019 and effective
from 1st April 2020

2. In news
Amalgamation of 10 public sector banks into
four big banks. After this the total number of
Public Sector Banks in the country will come
down to 12 from 27 banks in 2017. Apart from
this the government announced Rs 55,250 crore
upfront capital infusion in the PSBs

3. PNB, OBC and United Bank to be merged. The new merged bank
will be the second largest PSB in the country with Rs 18 lakh
crore business and second largest branch network in India

4. Canara and Syndicate Bank will also be merged to
become the fourth largest PSB with Rs 15.2 lakh crore
business and third largest branch network in India.

5. Merger of Union Bank of India, Andhra Bank and
Corporation Bank will create India's fifth largest PSB
with Rs 14.6 lakh crore business and fourth largest
branch network.

6. Indian Bank and Allahabad Bank merged. The new bank will be
seventh largest with Rs 8.08 lakh crore business.

7. • Government also announced Rs 55,250 crore upfront
capital for credit growth & regulatory compliance to
support economy.
• PNB will get Rs 16,000 crore;
• Union Bank Rs 11,700 crore;
• Canara Bank Rs 6,500 crore;
• Indian Overseas Bank Rs 3,800 crore;
• Central Bank of India Rs 3,300 crore;
• Bank of Baroda Rs 7,000 crore;
• Indian Bank Rs 2,500 crore and Uco Bank Rs 2,100 crore.

8. Head/A
nchor
Bank
Merged banks
Business Size
(Rupees)
PSB Size
State Bank of India (Merged earlier) 52.65 Lakh crore 1st largest bank
Punjab
National
Bank
Punjab National Bank
Oriental Bank of Commerce
United Bank of India
17.94 Lakh crore 2nd largest Bank
Bank of Baroda (Merged earlier) 16.13 Lakh crore 3rd largest bank
Canara
Bank
Canara Bank
Syndicate Bank
15.20 Lakh crore 4th largest Bank
Union
Bank of
India
Union Bank of India
Andhra Bank
Corporation Bank
14.59 Lakh crore 5th largest Bank
Bank of
Inia
9.03 Lakh Crore 6th Largest Bank
Indian
Bank
Indian Bank
Allahabad Bank
8.08 Lakh crore 7th largest Bank

9. Head/A
nchor
Bank
Merged banks
Business Size
(Rupees)
PSB Size
Central Bank Of India 4.68 Lakh Crore 08th Largest Bank
Indian Overseas Bank 3.75 Lakh Crores 09th Largest Bank
UCO Bank 3.17 Lakh Crore 10th Largest Bank
Bank of Maharashtra 2.34 Lakh Crore 11th Largest Bank
Punjab & Sind Bank 1.71 Lakh Crore 12th Largest Bank

10. GOI Motive & Objective behind
Merger of PSBs
• Enhanced capacity to increase credit
• Banks with a strong national presence and
international reach
• Reduction in lending cost
• Next Generation technology for the banking
sector
• Improved ability to raise market resources

11. Advantages of Mega Merger
• Reduction in cost of operation
• Financial Inclusion and broadening of geographical reach.
• NPA and risk management are benefitted.
• Availability of a bigger scale of expertise and thus minimising
the scope of inefficiency which is more in small banks.
• Disparity in wages will reduce and service conditions get
uniform.
• Lesser burden on government to recapitalise PSB’s from time
to time.
• Financial Savings through abolishing redundant posts and
designations.
• Large banks will also be finance large projects.

12. Disadvantage of Mega Merger
• Too big to fail
• More vulnerable to global economic crisis
• Destroys the idea of decentralization (regional focus)
• Weaker bank merger may create problem to healthy
bank.
• This is still not going to solve the real problem of bad
loans
• Merger of employees will be another employees
• Problem of overstaff ( Disguised employment)
• Lesser new jobs in PSB.

13. D. Subbarao statement- former RBI
governor
• Do we still need PSBs?
• Is not the financial sector deep enough to take
care of financial intermediation without the
government at the steering wheel?
• Are not there better uses for the government
mind space and its time?

14. Raghu Ram Rajan Statement written
in a book- Former RBI governor
• Ownership is just one contributor to governance.
• Even Some private banks have also been poorly
governed.
• So we need to look at pragmatic ways to improve
governance across the board.
• There certainly is a case to experiment by privatising one
or two mind sized public sector banks.
• Reducing the government stake below 50% for a couple
of others
• While working on government reforms for the rest.
• We will then actually then have some evidence in future.